Global Logistics Issues - Assignment Example

Global Logistics Supply chain networks can be very complex. A number of trends in today’s logistics environment have a significant effect on decisions involving facility location. What are the issues governing facility site location? (20 possible points). In the modern supply chain networks, various issues govern site location. According to Coyle, Langley, Gibson, Novack and Bardi (2012), strategic inventory positioning is one of the significant trends affecting logistics facility location. With this regard, items considered as being fast moving and profitable would be positioned more conspicuously to the market as opposed to those that are slow-moving and less profitable. This could also be termed as inventory segmentation strategy. Another issue on site location is the move from disintermediation of numerous distributor/wholesaler operations to customer-direct delivery. This makes it possible for customers to be supplied with products directly from manufacturing. Often, this causes the need for complete distribution facilities network to diminish. There has increasingly been the need for cross-docking facilities that are strategically located, serving as points of transfer for consolidated shipments which need to be mixed into smaller shipments to be delivered to individual customers. In inbound movements, this concept significantly reduces the need for facilities for inbound consolidation. Facility site selection involves due diligence with emphasis on accessibility to major import and export shipment ports. It is for this reason that DHL, a leading logistics service provider, opened a distribution center in Dubai. According to DHL Supply Chain (2014), Dubai city is home to 2 major ports – Port Rashid and Jebel Ali Port. Furthermore, the city has two large airports – Dubai International Airport and Al Maktoum International Airport, the former being the busiest airport globally. These ports make imports and exports accessible to the logistics firm. Finally, there is the issue of using third party logistics services providers who partly or wholly take up the responsibility of distributing products to customers and moving inbound materials and parts to the facility. A majority of firms globally are coming up with specialized capabilities for import and export movements. 2. There are two types of demand. What are they and how do they influence the supply chain? Provide examples of each. (20 possible point) The two types of demand are independent and dependent. Whereas independent demand refers to the demand for a primary item, dependent demand refers to the demand determined by demand for such an independent item (Coyle, et al., 2012). Wisner et al. (2011) provide an appropriate example with reference to demand for All Terrain Vehicle, ATV Corporation. At a given time, there is a demand for 120 units of ATVs. This demand for the finished product which is created by customers would be referred to as independent. For this demand, the manufacturer is aware that 120 handlebars, one for each ATV, and 480 wheel rims, 4 for each ATV, would be needed. Thus, the demand for handlebars and rims is dependent because it is determined by the demand for ATVs. These demands are useful in the supply chain. As noted by Coyle et al. (2012), independent demand would be used to forecast future demand. Considering the example given, the manufacturer would know that the future demand for handlebars and rims would be equal and quadruple the demand for ATVs respectively because each ATV needs a handlebar and 4 rims (Wisner et al., 2012). Therefore, there would be no need to engage in forecasting demand for handlebars and wheel rims having already forecasted the demand for ATVs, known as base or normal demand. However, this is subject to fluctuations due to random variations, trends, seasonal patterns and business cycles. It should however be noted that in a service shop selling spare parts for ATVs, these handlebars and rims would be taken as independent demand items. 3. Define and discuss Collaborative Planning. Forecasting, and Replenishment (CPFR) and its impact on supply chain management. (20 possible points). Organizations have structured their processes of planning so as to reach internal forecast consensus. Various initiatives have been employed to create effectiveness and efficiency through integrating supply chain processes and activities. One of such recent initiatives is referred to as collaborative planning, forecasting, and replenishment (CPFR) which, according to Coyle et al. (2012), aims at attaining true supply chain integration. Therefore, CPFR could be defined as a set of business processes which could be used by supply chain entities to collaborate on various retailer/manufacturer functions with the aim of attaining overall supply chain efficiency. It is a breakthrough planning, forecasting and replenishment business model for developing true supply chain integration. This concept aims at promoting cooperative inventory management through joint replenishment and visibility of products in the whole of a supply chain (Wisner, et al., 2011). As such, it allows inventory, together with upcoming requirements, to be continuously updated so as to make end-to-end supply chain activities more efficient. Furthermore, efficiency would be enhanced because of reduced inventory logistics, merchandising and transportation costs across the involved trading partners. CPFR has significant impact on SCM. According to Wisner et al. (2011), CPFR aims at optimizing the supply chain through improvement of accuracy of demand forecast, reduction of inventories in the supply chain, avoiding stock-outs, delivery of rightful products at rightful time and location and improvement of customer service. CPFR eliminates inventory shifting among trading partners which suboptimises supply chain. Furthermore, it provides manufacturers, distributors and retailers Internet based technology for their collaboration. It allows trading partners to come to a consensus on a forecast for an item with each partner translating this to a single execution plan (Coyle et al., 2012). As noted by Mangan, Lalwani and Butcher (2008), CPFR is a useful tool between manufacturers and retailers as it allows trading relationship to be more effective by virtue of promoting better demand information exchange. CPFR creates a collaborative environment where trading partners come closer together so as to promote critical efficiencies with regards to customer service, inventories and bottom-line savings. This sharing of forecasts among firms is the real value of CPFR. 4. Organizations are faced with a number of issues related to determining how much inventory to accumulate. What are they? Discuss how seasonality can affect inventory. (20 possible points). Inventory plays a crucial role in determining cost of goods and in supporting order fulfilment. Thus, managing inventory is critical for organizations. Determining the amount of inventory to accumulate is a challenge because of uncertainty which faces all organizations. On the demand side, uncertainty occurs due to shifts in the quantity and time of customer orders. The supply side has uncertainty of getting the needful from suppliers and the time of order fulfillment. Similarly, seasonality causes given organizations to grapple with the determination of the amount of inventory to accumulate, considering this affects transportation too. Finally, analysis on the probability, cost and risk involved with regards to anticipatory stocks poses a challenge on inventory decisions (Coyle et al., 2012). The involved uncertainty of the anticipated event makes this analysis a challenge. Seasonality is a factor that significantly affects demand for finished goods, raw materials or both. With regards to raw materials, some organizations such as those dealing with agricultural products have a supply of their raw materials in adequate amounts and better prices during the peak season, say, the harvesting season for agricultural produce. Because demand for their finished products remains constant throughout the year, such organizations have to store the finished products until they are sold (Mangan et al., 2008). For example, wine is on demand throughout the year in California. However, the harvest season for grapes, the key raw material for wines, begins in late spring through late fall. During this peak season, wine manufacturers use advanced storage techniques to keep the grapes in the appropriate form for use during winter months when the vines are left to rest (California Table Grape Commission, 2010). Thus, during peak seasons, wine manufacturers grapple with enormous grapes inventory which eases as the harvesting season approaches. Alternatively, the raw materials could be stored in pre-processed form for use in making finished products as dictated by demand (Coyle et al., 2012). Thus, the raw materials have to be converted to finished goods when available. As a result, such organizations grapple with high obsolescence and/or storage costs. On the other hand, seasonality in demand for finished goods also affects inventory. Organizations that experience demand swings have to maintain production fairly constant while avoiding excess inventory at the same time. This, according to Coyle et al. (2012), calls for a trade-off between the cost of manufacturing per unit and cost of inventory. 5. Customer service is often the key link between logistics and marketing within an organization. Define and discuss the Marketing/Logistics interface. What role does logistics play? (20 possible points). The logistics/marketing interface refers to the linkage between logistics and marketing in an organization. The existence of this linkage has been practically confirmed from practice. As noted by Ellinger (2000), should there be a failure in the logistics system, the customer would not receive delivery as promised therefore risking loss of revenue for the organization. In a similar way, an organization could produce a quality product and offer it for sale at the right price with marketing selling it, but should logistics compromise on where and when the delivery is to be executed as promised, it would cause the customer to be dissatisfied. Coyle et al. (2012) document customer service as the link joining logistics and marketing as without it, neither of the two would achieve its intended objective. Logistics plays a crucial role of minimizing the total cost involved in the various logistics activities at a given service level. This would be determined by marketing. Importantly, logistics adds the critical utilities of time, place and quantity to products and further enhances possession and form utilities through manufacturing and marketing. In the modern context, logistics is critical in influencing the level of customer service and the financial position of a given organization. Therefore, combined with customer service, logistics reduces the prices of products and lead times to customers and increases the availability of products (Coyle et al., 2012). For this reason, the cost of logistics would be traded off for these benefits in modern organizations. References California Table Grape Commission. (2010). The California tradition for viticulture. Retrieved 26 July 2014 from http://www.tablegrape.com/history.php Coyle, J. J., Langley, C. J., Gibson, B. J., Novack, R. A. & Bardi, E. J. (2012). Supply chain management: A logistics perspective (9th ed.). Mason, OH: South-Western Cengage Learning. DHL Supply Chain. (2014, June 4). “Dubai: The logistics hub?” Supply Chain Matters. Retrieved 23 July 2014 from https://www.dhlsupplychainmatters.dhl.com/ Ellinger, A. E. (2000). Improving marketing/logistics cross-functional collaboration in the supply chain. Industrial Marketing Management, 29, 85 – 96. Mangan, J., Lalwani, C. & Butcher, T. (2008). Global logistics and supply chain management. Chippenham, Wiltshire: John Wiley. Wisner, J., Tan, K. & Leong, G. K. (2011). Principles of supply chain management: A balanced approach (3rd ed.). Mason, OH: South-Western, Cengage Learning. Read More